Based on its anti-growth, pro-death properties, ceramide (Cer) has been proposed to function as a tumor suppressor lipid, but the specific pathways involved and their roles in tumor behavior are unclear. Here we identify neutral sphingomyelinase-2 (N2), a key enzyme for Cer generation, as a candidate mediator of these anti-tumor effects in breast cancer (BC) and begin to uncover a mechanism of action. Expression of N2 is decreased and is inversely associated with worse clinical outcomes in all subtypes of BC. Functionally, restoring N2 expression in basal and HER2+ BC cells suppresses in vitro colony formation in soft agar but with minimal effects on cell viability in monolayer or suspension. This suggests that N2 is primarily suppressing anchorage independent growth (AIG), a surprisingly understudied transformative biology in cancer. In vivo orthotopic models demonstrate that N2 overexpression reduces tumor growth and spontaneous metastasis both in immunocompetent and immunocompromised mice suggesting that N2 is acting, at least in part, through tumor intrinsic effects. Combinatorial analysis of a TCGA cohort of BC patients with microarray analysis of xenograft tumors revealed that N2 is correlated with the inhibition of YAP/TAZ signaling, a known oncogenic pathway linked to AIG. Validation experiments of an independent tumor cohort by real-time PCR and immunofluorescence confirmed that N2 suppressed a set of known YAP/TAZ target genes and blunted YAP/TAZ nuclear translocation. Consistent with this, exogenous Cer treatment of cells in monolayer suppressed YAP/TAZ nuclear translocation, led to a phosphorylation event on YAP-S397, and decreased YAP/TAZ total protein via western blot, suggesting possible degradation via B-TRCP mediated E3 ligase. Reconstitution of YAP signaling via LATS kinase inhibition and genetic overexpression of constitutively active YAP restored colony formation potential of BC cells with high N2. Collectively, these studies demonstrate a novel tumor suppressor pathway in BC, centered on N2 as a negative regulator of tumor intrinsic growth and suggest that N2 exerts these functions by inhibiting the YAP/TAZ activity. Overall, these studies begin to advance our molecular understanding of how loss of N2 can impact BC tumorigenesis and suggest that strategies to restore N2-dependent signaling could be a therapeutic avenue worthy of further investigation.